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Barun Roy: The other side of poverty

With deeper income inequality and sharp social divisions, Asian nations need to take a different approach to development

Barun Roy 

Barun Roy

Having pursued vigorous economic growth over many years, Asian nations are now increasingly aware that the benefits of growth have not reached the poorer sections of society as much as expected and are only sharpening social divisions. And, as some of these nations tend to tackle the problem by pushing for even more vigorous growth, hoping that its effect will gradually embrace all sections of society, income inequalities get only deeper, bringing out the need for a fundamentally different approach to development.

The Philippines, for one, is now keenly aware that the incidence of poverty in the country must be lowered from 26.2 per cent in 2012 to 16.8 per cent by 2016. And it hopes to achieve this by inflating infrastructure spending to five per cent of gross domestic product (GDP) by 2016, against less than three per cent in 2013. It also talks of things such as disaster-risk reduction and mitigation, income diversification, and social insurance and protection. But the main emphasis is on further accelerating the traditional growth model, which has served the country well until now. The economy grew 7.2 per cent in 2013 and received three investment-grade scores from Moody's, Standard and Poor's, and Fitch.

But can growth by itself, without a balanced plan of how it should be carried out and what of its elements are more important than others, create an economically unified nation? Even by the traditional poverty threshold of 20,000 pesos per capita per year, some 25.2 per cent Filipinos are still counted as absolute poor. Unemployment and underemployment rates are still hovering high. If income inequality is factored in, a totally different picture would emerge.

Indonesia is another country where this issue is looming big as it goes for its next presidential election in July. "The wealth gap in the world's fourth most populous country is widening, threatening President Yudhoyono's goal of reducing poverty before he steps down after a decade in power," Jakarta Globe commented in a recent report. "It's also restraining growth in Southeast Asia's largest economy as consumption by the poorest half of the population stagnated last year, according to the World Bank," the report added.

It's a dilemma for which the government has no immediate answer and won't have one as long as it's rutted in traditional economic thinking. Indonesia is racing ahead with plans for rapid industrialisation and hopes to become an important automobile production hub in the region. Car sales are surging as much as 11 per cent year-on-year as the middle class keeps acquiring more purchasing power. While a vendor, according to Globe, earns about $87 a month selling instant coffee from his rusty bicycle near Jakarta Stock Exchange, at nearby TechnoBike, they've sold out of $25,000 Lamborghini-branded bicycles.

Lifting people above a statistical benchmark is no longer enough since the perception of poverty itself has changed. It's no longer about having two square meals a day or a roof above your head. While the pursuit of GDP-oriented economic policies has given the countries the initial motion to move forward, over the years it has served only to create new benchmarks of deprivation. And as income gaps widen, "sub-nations" emerge within each nation leading to economic and social mutinies that are increasingly difficult to tackle.

The problem is all the more challenging because Asia-Pacific, in spite of having slashed extreme poverty overall, is still home to 1.6 million people living on $2 a day or less, and almost three-quarters of the world's underweight children. Besides, about 600 million people in the region have no access to electricity and some 1.7 billion are said to lack improved sanitation.

People are now drawing a distinction between their own living conditions and those of their more affluent neighbours. There's growing evidence that societies where income is unequally distributed tend to be less healthy, more violent, display greater social problems, and have poorer educational outcomes. Writing in a recent issue of The Straits Times, based on his studies of villages in northeast Thailand over three decades, Jonathan Rigg, a professor with the National University of Singapore, said: "The focus must shift from the quantity of growth to the quality of growth."

Earlier, the experience of poverty - of meagre living - was a shared one. There were no great cleavages in society. Now, villagers in some areas live more comfortable lives and have running water and electricity. The large majority of households have motorbikes and mobile phones. Children go to secondary schools. Many also have bank accounts and could access medical care. "Even so, more than one-third described themselves as 'poor' and nearly one in 10 as 'very poor,'" Rigg wrote.

There was a lot of talk at the Asian Development Bank's 47th annual meeting in early May at Astana, Kazakhstan, about inclusive growth. But inclusion won't happen unless the entire character of development planning itself is changed, providing for more balance between rural and urban areas and treating them as an integral and interdependent economic hinterland.

rbarun@gmail.com

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First Published: Wed, May 28 2014. 21:48 IST
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